The JSE says it will continue to look at options that will allow companies to raise capital more speedily when confronted by crises like Covid-19, but that these must be balanced against the need to protect the rights of minority investors.

“The JSE has been approached by a number of sponsors and advisers exploring possibilities on how capital can be raised quicker and more efficiently, and is in active discussions with the Financial Sector Conduct Authority (FSCA) on further measures to speed up the process of issuers raising capital even further whilst still protecting the interests of investors,” said JSE director for issuer regulation Andre Visser.

The JSE was responding to comments made by Investec’s former boss, Stephen Koseff, who on Tuesday called on it to examine ways in which companies could more speedily raise money in the midst of crises such as the coronavirus pandemic.

The JSE pointed out that there are a number of mechanisms already in place for companies to raise money without going through the time-consuming process of seeking shareholder approval; these include through renounceable and non-renounceable rights offers.

In circumstances where a company is in distress, the JSE has the discretion to waive the requirement for the preparation of a circular and the requirement to seek shareholder approval.

But when it comes to conventional cash for shares offers, it has no power to grant waivers or exceptions to companies as this is a central tenet of the Financial Markets Act, which regulates its conduct.

The act imposes “an unequivocal obligation on the JSE to enforce all of its listings requirements in their entirety and on an equal basis”, said Visser.

Despite this the exchange remains committed to engaging with stakeholders on ways in which the process can be sped up while still protecting the interests of investors.

Koseff specifically cited markets overseas which allowed companies to issue as much as 10%-15% of existing share capital overnight when situations call for it.

In response, Visser said: “Some of the measures applied by the UK, Australia and others have been subject to public criticism that certain capital raising measures and indulgences afforded have negatively impacted minority shareholders and retail investors. The existing regulatory framework therefore makes provision for a range of different measures for issuers to raise capital, some traditional methods, expedited measures, some requiring shareholders’ approval and others not.”

Koseff was cognisant that without a mechanism in place that would allow smaller retail investors to buy in at a later stage, they would be at risk of being diluted.

The JSE said that R1.7bn had been raised from secondary offerings on the bourse since the lockdown was imposed by President Cyril Ramaphosa on March 27.


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